Are You Financially Ready for Retirement?

Wondering if you have enough saved, and how and when to retire? Here are some tips to help you plan and prepare for your golden years.

How Do You Save for Retirement?

Having a carefree retirement means saving well in advance. Have you maximized your investments in these common savings vehicles?

401K Plan

Many employers will match a portion of your contributions when you put aside pre-tax money from your paychecks into a 401K plan. Because the contributions use pre-tax money, participating in a 401K plan also will reduce your taxable income and can help to lower your tax bill.

According to the Internal Revenue Service, the individual contribution limits for a 401K plan is $18,000 in 2017 with an additional $6,000 of catch-up contributions available to employees who are 50 and older. So if you are 50-something and want to give your retirement savings a boost, you could contribute as much as $24,000 a year to an employer-sponsored 401K plan.

Individual Retirement Account (IRA)

With an IRA, you can stash as much as $5,500 per year for your retirement, or $6,500 per year if you are 50 or older. With a traditional IRA, you may get a tax break when you contribute, since your contributions may be tax deductible. With a Roth IRA, you won’t get a tax deduction when you contribute but you also won’t be taxed when you withdraw that cash at retirement age (older than age 59 ½).

What Is the Retirement Age in the U.S.?

The earliest you can receive Social Security benefits is age 62, but if you start taking your benefits before your full retirement age, you will receive reduced benefits until you reach that full retirement age. (Your full retirement age depends on your year of birth, and you can figure yours out using the Social Security Administration’s retirement calculator.)

Everyone wants to retire early, but can you afford it? According to the Social Security Administration, a man reaching age 65 today can expect to live on average until age 84 and women can expect to live until 86. Does your retirement plan provide for 20-plus years of living expenses? When should you begin receiving your Social Security benefits? And if you are married, when should your husband or wife?

If you have built up significant retirement savings, you may be able to retire early. But if you have some catching up to do, it may be best to work at least until the age when you will receive your full Social Security retirement benefits.

No matter what age you are now or the age at which you plan to retire, use a retirement savings calculator to help you figure out how much money you need in retirement (and how much that means you should be saving now.) Consult a financial planner and discuss your retirement savings, expected Social Security benefits and your retirement plans and goals. Will you be significantly downsizing and lowering your expenses in retirement? Or do you plan to stay in the same house for the next 30 years? These are all factors to consider and things to discuss with a financial adviser.

Get Out of Debt Before You Retire

If you are struggling with high-interest credit card debt, now is the time to pay it down. Carrying too much credit card debt can lower your credit score (you can see your credit scores for free on Credit.com and a personalized action plan for improving your scores). It also eats away at your retirement savings — every bit of interest you have to pay on credit card debt is money you won’t have when you retire. So make paying down debt and keeping it gone an important part of your retirement plan. Adjust your budget and build up some emergency savings to minimize your chances of reaching for a credit card when a large unexpected expense occurs.

This article has been updated. It was originally published February 02, 2015.

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Ted

“Will you be significantly downsizing and lowering your expenses in retirement? Or do you plan to stay in the same house for the next 30 years?”

There are more important questions. “Will you still be healthy enough to enjoy your delayed retirement? Or do you plan to go straight from your desk chair at the office to your deathbed at home?”

InternalMonologue

Very true. I retired at 62 partly because none of my known relatives has made it to age 80. I wanted to have at least a chance of a few good years of doing what I want or even doing nothing.

Andy Bandy

Good choice, but try your best to stay healthy. Yoga, meditation every morning and little sun exposure will keep you perfectly healthy. Keep your mind and body fresh and happy by lowering stress and worries. It’s all within your mind to make and keep it happy and healthy. Enjoy your retirement. Keep talking to friends and relatives, also doing some voluntary work. All the best.

InternalMonologue

Thanks, i have been retired nearly a year now. Sooo nice, no stress, no hurry.

ROBERT

I retired moved to fla with my wife.. we bought a very nice home, new car (to last) two new golf carts (she took up golf and became one of the best golfers in central fla) she beats me all the time.. she won the valentines tournament in oacal fla in feb. she won many events during the first 5 months of 2015… I wish I could break 90.. let alone she shot a 67 the other day.. wow……………………. oh well she took and early retirement and we do ok.. enough to pay the bills.. to wait according to social security we should have one million or more or be poor.. well, if that is what social secourity said………… we do not even have 20k…

Bob Rich

Wow! If you have pensions plus social security that pays the bills (including all those greens fees) more power to you! But with less than $20k in savings that gives you no margin for error (i.e., the unplanned bill or real inflation greater than the increase in SSI payments ). The idea of needing savings of $1 mil. + is based on the idea that you should only start out withdrawing 4% of your savings ($40k on a $1 mil. retirement fund)) if you want it to both keep up with inflation and last for a potential 30 year retirement. If you don’t need that much above your social security and pensions (or other steady income source) or if you don’t feel the need to be prepared for a full 30 years of retirement, then you wouldn’t need as much.

sar48

I am planning to do so next year. at 58 I will have 500K in 401K (50/50), three apartments (two rented for a net of 20K a year), all paid, some cash to cover two years of expenses, and will be waiting for SS. I will move to Fl. and live modestly. I think I can make it.

nparkgolf

So, just when do you plan on filing for SS? Early at 62, or closer to you FRA (66)? With enough cash to cover “two years of expenses”… it would help to know just what that yearly amount is. I ask as I expect to be close to your expected computations.

freda

if your on disability,when do you think its better to retire/ im 55 right now!

http://www.credit.com/ Credit.com Credit Experts

It depends on your individual situation. A little time with a financial planner could help give you some guidance.

steve

Get out of debt is smart for credit cards, car loans, leases, etc. But to pay off your mortgage is most likely stupid, unless you have a very high interest loan. I have over $600K equity in my house doing nothing. Why would I want another $325K of equity in my house earning nothing? The rate is 3.5% fixed for 30 years. I have the opportunity to invest these funds right now at 10% tax free in apartments. I have known and worked for the principals as the CFO for 30 years, see all the numbers and due to depreciation, tax free for the next few years. I am not a debt guy, have paid cash for cars for 25 years and an 820 FICO. I only wish I lowed anther $200K

Beverly Diiorio

I am 62 and working full time. So wish I could retire at 66 but I have not been so smart with savings and in debt up to the neck. My husband is 58 and has been on SS Disability since 2004. I am very tired. I have a 401K but can only afford 4% right now, too many credit card debts and car payment. Is there any hope for me to retire at 66?

http://www.Credit.com/ Gerri Detweiler

Beverly – Have you thought about talking with a credit counseling agency to see if you can get out of debt by age 66? Being out of debt may certainly help.

Beverly Diiorio

I think I can pay off the car and maybe some of the smaller credit cards by then. I have one large credit card balance but afraid to cancel it or have a counseling agency get involved because we need to use it for food sometimes. Neither of us can mow the lawn or keep the house clean anymore so we are paying to have this done now. I am going to try to do this myself rather getting counseling.

http://www.Credit.com/ Gerri Detweiler

Ah I see. Do keep in mind though that most counseling agencies will do a free budget and review and that does not obligate you to go into a debt management plan. Additionally sometimes it is possible to keep one card out of the DMP.

Beverly Diiorio

Thank you

Robert

I am 59 years old and my wife is 51. We currently have approximately 1.4 million (50% stock&401k/50% cash). I am wanting to retire but not sure where I need to be to not run out of money in our 80’s. We have been debt free for 8 years now and I really want to retire.
Please advise. Thank you in advance

http://www.Credit.com/ Gerri Detweiler

Robert – Congratulations on the progress you’ve made! I’d encourage you to meet with a financial planner to create a plan for outliving your savings. You may want to read: How Does Your Financial Planner Get Paid?

Robert

Thank you very much

http://www.Credit.com/ Gerri Detweiler

You’re most welcome. Best to both of you.

Mike

I am out of work and living off savings. I have about 80,000 left. I’m 59. I have about 200k in an ira. With no prospects for work am looking at ss at 62. I’ll be out if savings then if no job. Will I be able to live on ss and payouts from my ira.

http://www.Credit.com/ Gerri Detweiler

Have you looked into Income contingent repayment for the Parent PLUS loan?

Mike

I did. I submitted my application and am awaiting a reply. This will lower my payments significantly for now. Do you have any other suggestions for my situation?

http://www.Credit.com/ Gerri Detweiler

It doesn’t seem to me the credit card debt would warrant bankruptcy — or even defaulting since you have enough in liquid savings to pay them.

I’ll see if we can get some other community members to weigh in with suggestions.